Canterbury’s earthquake insurance tribunal has ruled that IAG unreasonably refused some aspects of re-repairs to a quake-damaged Christchurch home after two failed attempts to fix it.

Alistair and Sandra Malcolm’s quake-damaged home in Mt Pleasant went to IAG after two failed repairs by the Earthquake Commission (EQC). The major insurer agreed that the couple’s home needed significant repairs, but both parties disagreed on the scope of works – with the insurer refusing to pay for six items in the repair plan.

Chris Somerville, chair of the tribunal, said that IAG must always take the customers’ interest into account instead of unreasonably withholding its permission – noting that it would be “unconscionable to allow an insurer with an obligation to act with the utmost good faith to wield unbridled power over the repair or rebuild process.”

“A balance must be struck between the cost to the insurer and the risk to the insured. When the insurer takes control of the decision-making, it must not act unreasonably in striking that balance,” Somerville said, as reported by Stuff.co.nz.

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The tribunal’s ruling pointed out options, including tendering as IAG wanted or having both parties hire quantity surveyors.

“Neither process is perfect,” Somerville said. “Although the parties could each agree to invite an equal number of builders to tender, each side could stack the deck with players whose pricing is likely to support their position. IAG is acting reasonably when it questions the reasonableness of (the contractor’s) price, but unreasonably when it demands a tender.”

Somerville confirmed that the tribunal would hire its own quantity surveyor to help both parties reach an agreement.